Street-Works' exit would shift $30 million debt back to Quincy

Thursday

Feb 27, 2014 at 12:01 AMMar 27, 2014 at 10:54 AM

Despite a stall in downtown construction, Koch's team says there will be enough new tax revenue in Quincy Center – both from existing properties and new buildings – to start paying off $30 million debt in 2017.

Patrick Ronan The Patriot Ledger @pronan_Ledger

QUINCY – As part of its $1.6 billion plan for downtown revitalization, private developer Street-Works agreed to pay off $30 million in city debt. But that debt may come back to the city of Quincy as Mayor Thomas Koch prepares to cut ties with the developer.Despite a stall in downtown construction, Koch’s team says there will be enough new tax revenue in Quincy Center – both from existing properties and new buildings – to pay off the debt principal when it becomes due starting in 2017.

“In recent years, the value of properties downtown has appreciated, so we fully expect the revenue from downtown will be able to absorb the bond costs,” Christopher Walker, spokesman for Koch, said.

In 2007, under former Mayor William Phelan, the city secured a $30 million loan from the state to make infrastructure improvements downtown, with most of the funds dedicated to the construction of Hannon Parkway. The state required that future tax revenue from the Quincy’s “urban renewal district” – the downtown area designated for redevelopment – would be used to pay back the debt.

Street-Works pledged to cover the $30 million principal amount as part of its 2010 redevelopment deal with the city, but that deal is now on the verge of collapse. Koch announced last week that the city would seek new partners unless Street-Works met critical project benchmarks within a month.

As tenant vacancies have increased amid uncertainty about which properties Street-Works would redevelop, tax abatements have gone up for at least one downtown property. Abatements, which are reductions in property taxes granted by the city’s board of assessors, are sought if owners think their property values are lower than the city’s assessment.

The four-story office building at 1515 Hancock St., owned by Quince Limited Partnership and tentatively under agreement to be bought by Street-Works, has been given a $62,460 tax abatement this year. Quince was given a $30,916 abatement last year, and a $28,886 abatement in 2012.

Last year, four other properties in the urban renewal district were granted abatements. Combined, the owners of 223 Parkingway, 100 Parkingway, 15 School St. and 1620 Hancock St. were given abatements totaling $83,485, according to assessors’ records.

Peter Moran, Quincy’s chief assessor, said the downtown properties were given abatements because of a lack of tenants paying rent. Assessors are still reviewing most of the city’s abatement requests for this year, but Moran said he hasn’t seen a spike in applications from Quincy Center building owners.

“They’re usually the same (properties) over the years, the same storefronts,” Moran said. “Some are doing well down there, some are struggling. It goes property to property.”

The city is required to start paying the principal of its downtown debt in 2017 – 10 years after it first drew from the bond. Walker said the city borrowed $10 million in 2007, and has since borrowed all but $5 million of the bond.

Since 2007, the city has spent “several hundred thousand” dollars per year in interest on the $30 million bond, all of which has come from the city’s general fund, Walker said. He said principal payments – covered by downtown tax revenue only – will range from $500,000 to $1 million annually over 30 years.

Walker had no comment when asked whether a deal with a new developer after Street-Works would involve payment of the city’s $30 million debt.

Koch’s administration expects to start generating new tax revenue from Merchants Row, the stalled first block of development projected to bring new residential and retail space to Cottage Avenue, Chestnut Street and Hancock Street. The block is now under the private control of investor Quincy Mutual Fire Insurance.